Darling's Budget can't save a Government led by Gordon Brown

Monday 20 April 2009 07:59 BST

THERE are many uncertainties as Alistair Darling prepares to present his second, though hopefully not his last, Budget on Wednesday. There is one ironic certainty, though. Whatever the size of the budget deficit as a percentage of GDP, it will be dwarfed by Labour's popularity gap: according to one poll yesterday, they now trail the Conservatives by 17 points. But there is no cloud without a silver lining and it is this gap that Mr Darling will silently welcome.

For one thing, he can get out of Gordon Brown's shadow. The idea that Brown was a genius chancellor and Darling was just a second best can now be forgotten.

As the recession has deepened, the warnings of the IMF that the UK economy was the least well prepared for the downturn are ringing true. Darling was left little room for manoeuvre by Brown last March.

The public-debt situation was already bad enough. The news since then has been dire. Darling was the first Cabinet minister last summer to warn how bad things were: his reward was to be briefed against by Number 10. We now know by whom.

There is no room for Darling to deliver a giveaway Budget: he has little left in the kitty. Earlier this year, Gordon Brown was scolding Angela Merkel and Nicolas Sarkozy to spend more money, as he hoped the UK would be doing. But Mervyn King, the Governor of the Bank of England, soon put a stop to that by telling the Treasury Select Committee last month that our public finances are in no shape for any such splurge.

Darling will welcome King's help because it is another snap of the chains with which the Prime Minister wanted to bind him. He can now be his own Chancellor and present the Budget in his own style.

Above all, this should mean no false hyping up of small numbers into big ones, no $250 billion dressed up as $5 trillion, as Brown did at the end of the G20 summit earlier this month. With Darling, we will get transparency and integrity.

The major uncertainty is that the recession has not yet bottomed out. Across the Atlantic, American banks Goldman Sachs, JP Morgan, Citibank and Wells Fargo are showing positive profits and the bottom may have been passed in the financial markets.

No such luck for Lloyds Banking Group and RBS, which have had a lot of Treasury help without much to show for it in the way of performance. So it is not yet time to cut spending - nor, given the state of the public finances, to give more money away.

The other great uncertainty, of course, is whether this is the last Budget of this Government or whether there will be a chance for another.

Brown had recovered from the Tories taking a 20-point lead last September; the idea was that the G20 circus would add to Brown's stature and then recovery would be in the bag in time for next May. But now Brown is right back to where he was last September in the opinion polls.

The Damian McBride smear scandal has harmed the Prime Minister much more than he will admit. Perhaps most serious, though, the Parliamentary Labour Party now sees that Number 10's spin doctors targeted them before they did the Tories. How will the PLP react?

Labour MPs will once again have to face the question as to whether they soldier on with this leader or try for a better one. As recently as last September, Brown's leadership was confirmed, as David Miliband was successfully spun against, yet again, by we-know-who. The party stuck with Brown, still seeing him as a towering figure who could deliver what they had expected from him for all these years.

It is now clear that this was a foolish hope. Brown's moral mask has been ripped off. His reputation for sound economics was destroyed even before the recession; McBride has destroyed his claim to sound politics. Come this June's elections for the European Parliament and selected local authorities, it will be decision time for the Labour Party.

If, as I expect, Labour suffers massive losses, then the time will be short for decision. There will be no time for the party's election procedures to be followed. The Cabinet may yet persuade Brown to bow out for the sake of the party he loves and elect an interim leader pending the next election and a proper race.

The latest polls do show one interesting development. Labour has lost ground not to the Tories but to the Liberal Democrats. I believe we could soon see opinion polls where the LibDems overtake Labour.

Vince Cable has looked good while Brown has not. Labour should remember that after 16 years in power, in 1922, the Liberals lost, never to be serious contenders for the rest of the century. This may hurry the Labour Party into a quick autumn election rather than sink further and risk a catastrophe.

This may be the last Budget of this Government if Labour soldiers on with Brown; or it may not be, if they change horses - they may live to fight another day.

Either way, it will suit Mr Darling: he can postpone the tough decisions until the next Budget. His Cabinet colleagues have written off the next election and started positioning themselves for the leadership.

Darling has got along with his tough job quietly and competently. He has come out of Brown's shadow. His main task on Wednesday is not to make things worse, not to promise more than he can deliver - and to warn us about the worse to come but not yet.

Budgets always look great on the day and for 24 hours afterwards. It will be a good time next Friday to examine the Budget coolly.

I expect it will be a solid, modest, honest Budget. Whether it is or not, though, it cannot save Labour. That decision lies with the Parliamentary Labour Party, and depends on whether Labour MPs have the courage to jettison the man who has led them to this low point, Gordon Brown.

* Lord Desai's first novel, Dead on Time, a political thriller about life in Westminster, is published this week by HarperCollins India.